Exhibit 10.7


 


HSN,
INC.

2008 STOCK AND ANNUAL INCENTIVE PLAN


 


Section 1.  Purpose; Definition


 


The purpose of this Plan is (a) to give the
Company a competitive advantage in attracting, retaining and motivating
officers, employees, directors and/or consultants and to provide the Company
and its Subsidiaries and Affiliates with a stock and incentive plan providing
incentives directly linked to stockholder value and (b) to assume and
govern other awards pursuant to the adjustment of awards granted under any IAC
Long Term Incentive Plan (as defined in the Employee Matters Agreement) in
accordance with the terms of the Employee Matters Agreement (“Adjusted Awards”).  Certain terms used herein have definitions
given to them in the first place in which they are used.  In addition, for purposes of this Plan, the
following terms are defined as set forth below:


 


(a)           “Affiliate”
means a corporation or other entity controlled by, controlling or under common
control with, the Company.


 


(b)           “Applicable
Exchange” means Nasdaq or such other securities exchange as may at the
applicable time be the principal market for the Common Stock.


 


(c)           “Award”
means an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock
Unit, or other stock-based award granted or assumed pursuant to the terms of
this Plan, including Adjusted Awards.


 


(d)           “Award
Agreement” means a written or electronic document or agreement setting
forth the terms and conditions of a specific Award.


 


(e)           “Beneficial
Ownership” shall have the meaning given in Rule 13d-3 promulgated
under the Exchange Act.


 


(f)            “Board”
means the Board of Directors of the Company.


 


(g)           “Bonus
Award” means a bonus award made pursuant to Section 9.


 


(h)           “Cause”
means, unless otherwise provided in an Award Agreement, (i) “Cause” as
defined in any Individual Agreement to which the applicable Participant is a
party, or (ii) if there is no such Individual Agreement or if it does not
define Cause:  (A) the willful or
gross neglect by a Participant of his employment duties; (B) the plea of
guilty or nolo contendere to, or conviction
for, the commission of a felony offense by a Participant; (C) a material
breach by a Participant of a fiduciary duty owed to the Company or any of its
subsidiaries; (D) a material breach by a Participant of any nondisclosure,
non-solicitation or non-competition obligation owed to the Company or any of
its Affiliates; or (E) before a Change in Control, such other events as
shall be determined by the Committee and set forth in a Participant’s Award
Agreement.  Notwithstanding the general rule of
Section 2(c), following a Change in Control, any determination by the
Committee as to whether “Cause” exists shall be subject to de novo review.


 


 





















 


 


(i)            “Change in
Control” has the meaning set forth in Section 10(c).


 


(j)            “Code”
means the Internal Revenue Code of 1986, as amended from time to time, and any
successor thereto, the Treasury Regulations thereunder and other relevant
interpretive guidance issued by the Internal Revenue Service or the Treasury
Department.  Reference to any specific
section of the Code shall be deemed to include such regulations and guidance,
as well as any successor provision of the Code.


 


(k)           “Commission”
means the Securities and Exchange Commission or any successor agency.


 


(l)            “Committee”
has the meaning set forth in Section 2(a).


 


(m)          “Common
Stock” means common stock, par value $0.01 per share, of the Company.


 


(n)           “Company”
means HSN, Inc., a Delaware corporation, or its successor.


 


(o)           “Disability”
means (i) “Disability” as defined in any Individual Agreement to which the
Participant is a party, or (ii) if there is no such Individual Agreement
or it does not define “Disability,” (A) permanent and total disability as
determined under the Company’s long-term disability plan applicable to the
Participant, or (B) if there is no such plan applicable to the Participant
or the Committee determines otherwise in an applicable Award Agreement, “Disability”
as determined by the Committee. 
Notwithstanding the above, with respect to an Incentive Stock Option,
Disability shall mean Permanent and Total Disability as defined in Section 22(e)(3) of
the Code and, with respect to all Awards, to the extent required by Section 409A
of the Code, “disability” within the meaning of Section 409A of the Code.


 


(p)           “Disaffiliation”
means a Subsidiary’s or Affiliate’s ceasing to be a Subsidiary or Affiliate for
any reason (including, without limitation, as a result of a public offering, or
a spinoff or sale by the Company, of the stock of the Subsidiary or Affiliate) or
a sale of a division of the Company and its Affiliates.


 


(q)           “EBITA”
means for any period, operating profit (loss) plus (i) amortization, including
goodwill impairment, (ii) amortization of non-cash distribution and
marketing expense and non-cash compensation expense, (iii) restructuring
charges, (iv) non-cash write-downs of assets or goodwill, (v) charges
relating to disposal of lines of business, (vi) litigation settlement
amounts and (vii) costs incurred for proposed and completed acquisitions.


 


 


(r)            “EBITDA”
means for any period, operating profit (loss) plus (i) depreciation and
amortization, including goodwill impairment, (ii) amortization of non-cash
distribution and marketing expense and non-cash compensation expense, (iii) restructuring
charges, (iv) non-cash write-downs of assets or goodwill, (v) charges
relating to disposal of lines of business, (vi) litigation settlement
amounts and (vii) costs incurred for proposed and completed acquisitions.


 


 


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(s)           “Eligible
Individuals” means directors, officers, employees and consultants of the
Company or any of its Subsidiaries or Affiliates, and prospective employees and
consultants who have accepted offers of employment or consultancy from the
Company or its Subsidiaries or Affiliates.


 


(t)            “Employee
Matters Agreement” means the Employee Matters Agreement by and among IAC,
Ticketmaster, Interval Leisure Group, Inc., HSN, Inc. and Tree.com, Inc.


 


(u)           “Exchange
Act” means the Securities Exchange Act of 1934, as amended from time to
time, and any successor thereto.


 


(v)           “Fair
Market Value” means, unless otherwise determined by the Committee, the
closing price of a share of Common Stock on the Applicable Exchange on the date
of measurement, or if Shares were not traded on the Applicable Exchange on such
measurement date, then on the next preceding date on which Shares were traded,
all as reported by such source as the Committee may select.  If the Common Stock is not listed on a
national securities exchange, Fair Market Value shall be determined by the
Committee in its good faith discretion, taking into account, to the extent
appropriate, the requirements of Section 409A of the Code.


 


(w)          “Free-Standing
SAR” has the meaning set forth in Section 5(b).


 


(x)            “Grant
Date” means (i) the date on which the Committee by resolution selects
an Eligible Individual to receive a grant of an Award and determines the number
of Shares to be subject to such Award or the formula for earning a number of
shares or cash amount, (ii) such later date as the Committee shall provide
in such resolution or (iii) the initial date on which an Adjusted Award
was granted under the IAC Long Term Incentive Plan.


 


(y)           “Group”
shall have the meaning given in Section 13(d)(3) and 14(d)(2) of
the Exchange Act.


 


(z)            “IAC” means IAC/InterActiveCorp, a Delaware
corporation.


 


(aa)         “Incentive
Stock Option” means any Option that is designated in the applicable Award
Agreement as an “incentive stock option” within the meaning of Section 422
of the Code, and that in fact so qualifies.


 


(bb)         “Individual
Agreement” means an employment, consulting or similar agreement between a
Participant and the Company or one of its Subsidiaries or Affiliates.


 


(cc)         “Nasdaq”
means the National Association of Securities Dealers Inc. Automated Quotation
System.


 


(dd)         “Nonqualified
Option” means any Option that is not an Incentive Stock Option.


 


 


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(ee)         “Option”
means an Award granted under Section 5.


 


(ff)           “Participant”
means an Eligible Individual to whom an Award is or has been granted.


 


(gg)         “Performance
Goals” means the performance goals established by the Committee in
connection with the grant of Restricted Stock, Restricted Stock Units or Bonus
Awards or other stock-based awards.  In
the case of Qualified-Performance Based Awards, (i) such goals shall be
based on the attainment of one or any combination of the following:  specified levels of earnings per share from
continuing operations, net profit after tax, EBITDA, EBITA, gross profit, cash
generation, unit volume, market share, sales, asset quality, earnings per
share, operating income, revenues, return on assets, return on operating
assets, return on equity, profits, total stockholder return (measured in terms
of stock price appreciation and/or dividend growth), cost saving levels,
marketing-spending efficiency, core non-interest income, change in working capital,
return on capital, and/or stock price, with respect to the Company or any
Subsidiary, Affiliate, division or department of the Company and (ii) such
Performance Goals shall be set by the Committee within the time period
prescribed by Section 162(m) of the Code and related regulations.  Such Performance Goals also may be based upon
the attaining of specified levels of Company, Subsidiary, Affiliate or
divisional performance under one or more of the measures described above
relative to the performance of other entities, divisions or subsidiaries.


 


(hh)         “Plan”
means this HSN, Inc. 2008 Stock and Annual Incentive Plan, as set forth
herein and as hereafter amended from time to time.


 


(ii)           “Plan Year”
means the calendar year or, with respect to Bonus Awards, the Company’s fiscal
year if different.


 


(jj)           “Qualified
Performance-Based Award” means an Award intended to qualify for the Section 162(m) Exemption,
as provided in Section 11.


 


(kk)         “Restricted
Stock” means an Award granted under Section 6.


 


(ll)           “Restricted
Stock Units” means an Award granted under Section 7.


 


(mm)       “Resulting
Voting Power” shall mean the outstanding combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors (or equivalent governing body, if applicable) of the entity resulting
from a Business Combination (including, without limitation, an entity which as
a result of such transaction owns the Company or all or substantially all of
the Company’s assets either directly or through one or more subsidiaries).


 


(nn)         “Retirement”
means retirement from active employment with the Company, a Subsidiary or
Affiliate at or after the Participant’s attainment of age 65.


 


 


 


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(oo)         “Section 162(m) Exemption”
means the exemption from the limitation on deductibility imposed by Section 162(m) of
the Code that is set forth in Section 162(m)(4)(C) of the Code.


 


(pp)         “Separation”
has the meaning set forth in the Employee Matters Agreement.


 


(qq)         “Share”
means a share of Common Stock.


 


(rr)           “Stock
Appreciation Right” has the meaning set forth in Section 5(b).


 


(ss)         “Subsidiary”
means any corporation, partnership, joint venture, limited liability company or
other entity during any period in which at least a 50% voting or profits interest
is owned, directly or indirectly, by the Company or any successor to the
Company.


 


(tt)           “Tandem
SAR” has the meaning set forth in Section 5(b).


 


(uu)         “Term”
means the maximum period during which an Option or Stock Appreciation Right may
remain outstanding, subject to earlier termination upon Termination of Employment
or otherwise, as specified in the applicable Award Agreement.


 


(vv)         “Termination
of Employment” means the termination of the applicable Participant’s
employment with, or performance of services for, the Company and any of its
Subsidiaries or Affiliates.  Unless
otherwise determined by the Committee, if a Participant’s employment with, or
membership on a board of directors of the Company and its Affiliates terminates
but such Participant continues to provide services to the Company and its
Affiliates in a non-employee director capacity or as an employee, as
applicable, such change in status shall not be deemed a Termination of
Employment.  A Participant employed by,
or performing services for, a Subsidiary or an Affiliate or a division of the
Company and its Affiliates shall be deemed to incur a Termination of Employment
if, as a result of a Disaffiliation, such Subsidiary, Affiliate, or division
ceases to be a Subsidiary, Affiliate or division, as the case may be, and the
Participant does not immediately thereafter become an employee of (or service
provider for), or member of the board of directors of, the Company or another
Subsidiary or Affiliate.  Temporary
absences from employment because of illness, vacation or leave of absence and
transfers among the Company and its Subsidiaries and Affiliates shall not be
considered Terminations of Employment. 
Notwithstanding the foregoing, with respect to any Award that
constitutes “nonqualified deferred compensation” within the meaning of Section 409A
of the Code, “Termination of Employment” shall mean a “separation from service”
as defined under Section 409A of the Code. 
For the avoidance of doubt, the Separation shall not constitute a
Termination of Employment for purposes of any Adjusted Award.


 


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Section 2.  Administration


 


(a)           Committee.  The Plan shall be
administered by the Compensation Committee of the Board or such other committee
of the Board as the Board may from time to time designate (the “Committee”),
which shall be composed of not less than two directors, and shall be appointed
by and serve at the pleasure of the Board. 
The Committee shall, subject to Section 11, have plenary authority
to grant Awards pursuant to the terms of the Plan to Eligible Individuals.  Among other things, the Committee shall have
the authority, subject to the terms and conditions of the Plan and the Employee
Matters Agreement (including the original terms of the grant of the Adjusted
Award):


 


(i)            to select the
Eligible Individuals to whom Awards may from time to time be granted;


 


(ii)           to determine
whether and to what extent Incentive Stock Options, Nonqualified Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units, other
stock-based awards, or any combination thereof, are to be granted hereunder;


 


(iii)          to determine the
number of Shares to be covered by each Award granted hereunder;


 


(iv)          to determine the
terms and conditions of each Award granted hereunder, based on such factors as
the Committee shall determine;


 


(v)           subject to Section 12,
to modify, amend or adjust the terms and conditions of any Award;


 


(vi)          to adopt, alter and
repeal such administrative rules, guidelines and practices governing the Plan
as it shall from time to time deem advisable;


 


(vii)         subject to Section 11,
to accelerate the vesting or lapse of restrictions of any outstanding Award,
based in each case on such considerations as the Committee in its sole
discretion determines;


 


(viii)        to interpret the
terms and provisions of the Plan and any Award issued under the Plan (and any
agreement relating thereto);


 


(ix)           to establish any “blackout”
period that the Committee in its sole discretion deems necessary or advisable;


 


(x)            to determine
whether, to what extent, and under what circumstances cash, Shares, and other
property and other amounts payable with respect to an Award under this Plan
shall be deferred either automatically or at the election of the Participant;


 


(xi)           to decide all other
matters that must be determined in connection with an Award; and


 


(xii)          to otherwise
administer the Plan.


 


 


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(b)           Procedures.


 


(i)            The Committee may act only by a majority of its members
then in office, except that the Committee may, except to the extent prohibited
by applicable law or the listing standards of the Applicable Exchange and
subject to Section 11, allocate all or any portion of its responsibilities
and powers to any one or more of its members and may delegate all or any part
of its responsibilities and powers to any person or persons selected by it.


 


(ii)           Subject to Section 11(c), any authority granted to
the Committee may also be exercised by the full Board.  To the extent that any permitted action taken
by the Board conflicts with action taken by the Committee, the Board action
shall control.


 


(c)           Discretion
of Committee.  Subject to Section 1(h), any
determination made by the Committee or by an appropriately delegated officer
pursuant to delegated authority under the provisions of the Plan with respect
to any Award shall be made in the sole discretion of the Committee or such
delegate at the time of the grant of the Award or, unless in contravention of
any express term of the Plan, at any time thereafter.  All decisions made by the Committee or any
appropriately delegated officer pursuant to the provisions of the Plan shall be
final and binding on all persons, including the Company, Participants, and
Eligible Individuals.


 


(d)           Award
Agreements.  The terms and conditions of each Award, as
determined by the Committee, shall be set forth in an Award Agreement, which
shall be delivered to the Participant receiving such Award upon, or as promptly
as is reasonably practicable following, the grant of such Award.  The effectiveness of an Award shall not be
subject to the Award Agreement’s being signed by the Company and/or the
Participant receiving the Award unless specifically so provided in the Award
Agreement.  Award Agreements may be
amended only in accordance with Section 12 hereof.


 


Section 3.  Common Stock Subject
to Plan


 


(a)           Plan
Maximums.  The maximum number of Shares that may be
delivered pursuant to Awards under the Plan shall be the sum of (a) the
number of Shares that may be issuable upon exercise or vesting of the Adjusted
Awards and (b) 5,000,000.  The
maximum number of Shares that may be granted pursuant to Options intended to be
Incentive Stock Options shall be 3,333,333 Shares.  Shares subject to an Award under the Plan may
be authorized and unissued Shares or may be treasury Shares.


 


(b)           Individual
Limits.  No Participant may be granted Awards covering
in excess of 3,333,333 Shares during the term of the Plan; provided that
Adjusted Awards shall not be subject to this limitation.


 


(c)           Rules for Calculating Shares Delivered.


 


(i)            With respect to Awards other than Adjusted Awards, to the
extent that any Award is forfeited, or any Option and the related Tandem SAR
(if any) or Free-Standing SAR terminates, expires or lapses without being
exercised, or any Award is settled for cash, the Shares subject to such Awards
not delivered as a result thereof shall again be available for Awards under the
Plan.


 


 


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(ii)           With respect to Awards other than Adjusted Awards, if the
exercise price of any Option and/or the tax withholding obligations relating to
any Award are satisfied by delivering Shares to the Company (by either actual
delivery or by attestation), only the number of Shares issued net of the Shares
delivered or attested to shall be deemed delivered for purposes of the limits set
forth in Section 3(a).  To the
extent any Shares subject to an Award are withheld to satisfy the exercise
price (in the case of an Option) and/or the tax withholding obligations relating
to such Award, such Shares shall not be deemed to have been delivered for
purposes of the limits set forth in Section 3(a).


 


(d)           Adjustment
Provision.  In the event of a merger, consolidation,
acquisition of property or shares, stock rights offering, liquidation,
Disaffiliation, or similar event affecting the Company or any of its
Subsidiaries (each, a “Corporate Transaction”), the Committee or the
Board may in its discretion make such substitutions or adjustments as it deems
appropriate and equitable to (i) the aggregate number and kind of Shares
or other securities reserved for issuance and delivery under the Plan, (ii) the
various maximum limitations set forth in Sections 3(a) and 3(b) upon
certain types of Awards and upon the grants to individuals of certain types of
Awards, (iii) the number and kind of Shares or other securities subject to
outstanding Awards; and (iv) the exercise price of outstanding Options and
Stock Appreciation Rights.  In the event
of a stock dividend, stock split, reverse stock split, separation,
spinoff, reorganization, extraordinary dividend of cash or other property,
share combination, or recapitalization or similar event affecting the capital
structure of the Company (each, a “Share Change”), the Committee or the
Board shall make such substitutions or adjustments as it deems appropriate and
equitable to (i) the aggregate number and kind of Shares or other
securities reserved for issuance and delivery under the Plan, (ii) the
various maximum limitations set forth in Sections 3(a) and 3(b) upon
certain types of Awards and upon the grants to individuals of certain types of
Awards, (iii) the number and kind of Shares or other securities subject to
outstanding Awards; and (iv) the exercise price of outstanding Options and
Stock Appreciation Rights.  In the case
of Corporate Transactions, such adjustments may include, without limitation, (1) the
cancellation of outstanding Awards in exchange for payments of cash, property
or a combination thereof having an aggregate value equal to the value of such
Awards, as determined by the Committee or the Board in its sole discretion (it
being understood that in the case of a Corporate Transaction with respect to
which stockholders of Common Stock receive consideration other than publicly
traded equity securities of the ultimate surviving entity, any such determination
by the Committee that the value of an Option or Stock Appreciation Right shall
for this purpose be deemed to equal the excess, if any, of the value of the
consideration being paid for each Share pursuant to such Corporate Transaction
over the exercise price of such Option or Stock Appreciation Right shall
conclusively be deemed valid); (2) the substitution of other property
(including, without limitation, cash or other securities of the Company and
securities of entities other than the Company) for the Shares subject to
outstanding Awards; and (3) in connection with any Disaffiliation,
arranging for the assumption of Awards, or replacement of Awards with new
awards based on other property or other securities (including, without
limitation, other securities of the Company and securities of entities other
than the Company), by the affected Subsidiary, Affiliate, or division or by the
entity that controls such Subsidiary, Affiliate, or division following such
Disaffiliation (as well as any corresponding adjustments to Awards that remain
based upon Company securities).  The
Committee may adjust in its sole discretion the Performance Goals applicable to
any Awards to reflect any Share Change and any Corporate Transaction and any
unusual or non-recurring events and other extraordinary items, impact of


 


 


 


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charges for restructurings,
discontinued operations, and the cumulative effects of accounting or tax
changes, each as defined by generally accepted accounting principles or as
identified in the Company’s financial statements, notes to the financial
statements, management’s discussion and analysis or the Company’s other SEC
filings, provided that in the case of Performance Goals applicable to
any Qualified Performance-Based Awards, such adjustment does not violate Section 162(m) of
the Code.  Any adjustment under this Section 3(d) need
not be the same for all Participants.


 


(e)           Section 409A.  Notwithstanding the
foregoing:  (i) any adjustments made
pursuant to Section 3(d) to Awards that are considered “deferred
compensation” within the meaning of Section 409A of the Code shall be made
in compliance with the requirements of Section 409A of the Code; (ii) any
adjustments made pursuant to Section 3(d) to Awards that are not
considered “deferred compensation” subject to Section 409A of the Code
shall be made in such a manner as to ensure that after such adjustment, the
Awards either (A) continue not to be subject to Section 409A of the
Code or (B) comply with the requirements of Section 409A of the Code;
and (iii) in any event, neither the Committee nor the Board shall have the
authority to make any adjustments pursuant to Section 3(d) to the
extent the existence of such authority would cause an Award that is
not intended to be subject to Section 409A of the Code at the Grant Date
to be subject thereto as of the Grant Date.


 


Section 4.  Eligibility


 


Awards may be granted under the Plan to Eligible
Individuals and, with respect to Adjusted Awards, in accordance with the terms
of the Employee Matters Agreement; provided,
however, that Incentive
Stock Options may be granted only to employees of the Company and its
subsidiaries or parent corporation (within the meaning of Section 424(f) of
the Code) and, with respect to Adjusted Awards that are intended to qualify as
incentive stock options within the meaning of Section 421 of the Code, in
accordance with the terms of the Employee Matters Agreement.


 


Section 5.  Options and Stock
Appreciation Rights


 


With respect to Adjusted Awards, the provisions
below will be applicable only to the extent that they are not inconsistent with
the Employee Matters Agreement and the terms of the Adjusted Award assumed
under the Employee Matters Agreement:


 


(a)           Types of
Options.  Options may be of two types: Incentive Stock
Options and Nonqualified Options.  The
Award Agreement for an Option shall indicate whether the Option is intended to
be an Incentive Stock Option or a Nonqualified Option.


 


(b)           Types and
Nature of Stock Appreciation Rights.  Stock Appreciation Rights may be “Tandem
SARs,” which are granted in conjunction with an Option, or “Free-Standing SARs,”
which are not granted in conjunction with an Option.  Upon the exercise of a Stock Appreciation
Right, the Participant shall be entitled to receive an amount in cash, Shares,
or both, in value equal to the product of (i) the excess of the Fair
Market Value of one Share over the exercise price of the applicable Stock
Appreciation Right, multiplied by (ii) the number of Shares in respect of which
the Stock Appreciation


 


 


9

















 


Right has been exercised.  The applicable Award Agreement shall specify
whether such payment is to be made in cash or Common Stock or both, or shall
reserve to the Committee or the Participant the right to make that
determination prior to or upon the exercise of the Stock Appreciation Right.


 


(c)           Tandem SARs.  A Tandem SAR may be
granted at the Grant Date of the related Option.  A Tandem SAR shall be exercisable only at
such time or times and to the extent that the related Option is exercisable in
accordance with the provisions of this Section 5, and shall have the same
exercise price as the related Option.  A
Tandem SAR shall terminate or be forfeited upon the exercise or forfeiture of
the related Option, and the related Option shall terminate or be forfeited upon
the exercise or forfeiture of the Tandem SAR.


 


(d)           Exercise
Price.  The exercise price per Share subject to an
Option or Free-Standing SAR shall be determined by the Committee and set forth
in the applicable Award Agreement, and shall not be less than the Fair Market
Value of a share of the Common Stock on the applicable Grant Date.  In no event may any Option or Free-Standing
SAR granted under this Plan be amended, other than pursuant to Section 3(d),
to decrease the exercise price thereof, be cancelled in conjunction with the
grant of any new Option or Free-Standing SAR with a lower exercise price or
otherwise be subject to any action that would be treated, for accounting purposes,
as a “repricing” of such Option or Free-Standing SAR, unless such amendment,
cancellation, or action is approved by the Company’s stockholders.


 


(e)           Term.  The Term of each
Option and each Free-Standing SAR shall be fixed by the Committee, but shall
not exceed ten years from the Grant Date.


 


(f)            Vesting
and Exercisability.  Except as otherwise provided herein, Options
and Free-Standing SARs shall be exercisable at such time or times and subject
to such terms and conditions as shall be determined by the Committee.  If the Committee provides that any Option or
Free-Standing SAR will become exercisable only in installments, the Committee
may at any time waive such installment exercise provisions, in whole or in
part, based on such factors as the Committee may determine.  In addition, the Committee may at any time
accelerate the exercisability of any Option or Free-Standing SAR.


 


(g)           Method of
Exercise.  Subject to
the provisions of this Section 5,
Options and Free-Standing SARs may be exercised, in whole or in part, at any
time during the applicable Term by giving written notice of exercise to the
Company or through the procedures established with the Company’s appointed
third-party Option administrator specifying the number of Shares as to which the
Option or Free-Standing SAR is being exercised; provided, however,
that, unless otherwise permitted by the Committee, any such exercise must be
with respect to a portion of the applicable Option or Free-Standing SAR
relating to no less than the lesser of the number of Shares then subject to
such Option or Free-Standing SAR or 100 Shares. 
In the case of the exercise of an Option, such notice shall be accompanied
by payment in full of the purchase price (which shall equal the product of such
number of Shares multiplied by the applicable exercise price)


 


 


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by certified or bank check or such
other instrument as the Company may accept. 
If approved by the Committee, payment, in full or in part, may also be
made as follows:


 


(i)            Payments may be
made in the form of unrestricted Shares (by delivery of such Shares or by
attestation) of the same class as the Common Stock subject to the Option already
owned by the Participant (based on the Fair Market Value of the Common Stock on
the date the Option is exercised); provided,
however, that, in the
case of an Incentive Stock Option, the right to make a payment in the form of
already owned Shares of the same class as the Common Stock subject to the
Option may be authorized only at the time the Option is granted.


 


(ii)           To the extent
permitted by applicable law, payment may be made by delivering a properly
executed exercise notice to the Company, together with a copy of irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds necessary to pay the purchase price, and, if requested, the
amount of any federal, state, local or foreign withholding taxes.  To facilitate the foregoing, the Company may,
to the extent permitted by applicable law, enter into agreements for
coordinated procedures with one or more brokerage firms.  To the extent permitted by applicable law,
the Committee may also provide for Company loans to be made for purposes of the
exercise of Options.


 


(iii)          Payment may be made
by instructing the Company to withhold a number of Shares having a Fair Market
Value (based on the Fair Market Value of the Common Stock on the date the
applicable Option is exercised) equal to the product of (A) the exercise
price multiplied by (B) the number of Shares in respect of which the
Option shall have been exercised.


 


(h)           Delivery; Rights
of Stockholders.  No Shares shall be delivered pursuant to the
exercise of an Option until the exercise price therefor has been fully paid and
applicable taxes have been withheld.  The
applicable Participant shall have all of the rights of a stockholder of the
Company holding the class or series of Common Stock that is subject to the
Option or Stock Appreciation Right (including, if applicable, the right to vote
the applicable Shares and the right to receive dividends), when the Participant
(i) has given written notice of exercise, (ii) if requested, has
given the representation described in Section 14(a), and (iii) in the
case of an Option, has paid in full for such Shares.


 


(i)            Terminations
of Employment.  Subject to Section 10, a Participant’s Options
and Stock Appreciation Rights shall be forfeited upon such Participant’s
Termination of Employment, except as set forth below:


 


(i)            Upon a
Participant’s Termination of Employment by reason of death, any Option or Stock
Appreciation Right held by the Participant that was exercisable immediately before
the Termination of Employment may be exercised at any time until the earlier of
(A) the first anniversary of the date of such death and (B) the
expiration of the Term thereof;


 


 


11

















 


 


(ii)           Upon a Participant’s
Termination of Employment by reason of Disability or Retirement, any Option or
Stock Appreciation Right held by the Participant that was exercisable
immediately before the Termination of Employment may be exercised at any time
until the earlier of (A) the first anniversary of such Termination of
Employment and (B) the expiration of the Term thereof;


 


(iii)          Upon a Participant’s
Termination of Employment for Cause, any Option or Stock Appreciation Right held
by the Participant shall be forfeited, effective as of such Termination of
Employment;


 


(iv)          Upon a Participant’s
Termination of Employment for any reason other than death, Disability, Retirement
or for Cause, any Option or Stock Appreciation Right held by the Participant
that was exercisable immediately before the Termination of Employment may be
exercised at any time until the earlier of (A) the 90th day following such
Termination of Employment and (B) expiration of the Term thereof; and


 


(v)           Notwithstanding the
above provisions of this Section 5(i), if a Participant dies after such
Participant’s Termination of Employment but while any Option or Stock Appreciation
Right remains exercisable as set forth above, such Option or Stock Appreciation
Right may be exercised at any time until the later of (A) the earlier of (1) the
first anniversary of the date of such death and (2) expiration of the Term
thereof and (B) the last date on which such Option or Stock Appreciation
Right would have been exercisable, absent this Section 5(i)(v).


 


Notwithstanding the foregoing, the Committee
shall have the power, in its discretion, to apply different rules concerning
the consequences of a Termination of Employment; provided, however,
that if such rules are less favorable to the Participant than those set
forth above, such rules are set forth in the applicable Award
Agreement.  If an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Option will thereafter be
treated as a Nonqualified Option.


 


(j)            Nontransferability
of Options and Stock Appreciation Rights.  No Option or Free-Standing SAR shall be
transferable by a Participant other than (i) by will or by the laws of descent
and distribution, or (ii) in the case of a Nonqualified Option or
Free-Standing SAR, pursuant to a qualified domestic relations order or as
otherwise expressly permitted by the Committee including, if so permitted,
pursuant to a transfer to the Participant’s family members or to a charitable
organization, whether directly or indirectly or by means of a trust or
partnership or otherwise.  For purposes
of this Plan, unless otherwise determined by the Committee, “family member”
shall have the meaning given to such term in General Instructions A.1(a)(5) to
Form S-8 under the Securities Act of 1933, as amended, and any successor
thereto.  A Tandem SAR shall be
transferable only with the related Option as permitted by the preceding
sentence.  Any Option or Stock
Appreciation Right shall be exercisable, subject to the terms of this Plan,
only by the applicable Participant, the guardian or legal representative of
such Participant, or any person to whom such Option or Stock Appreciation Right
is permissibly transferred pursuant to this Section 5(j), it being
understood that the term “Participant” includes such 


 


 


 


12

















 


guardian, legal representative and
other transferee; provided, however, that the term “Termination
of Employment” shall continue to refer to the Termination of Employment of the
original Participant.


 


Section 6.  Restricted Stock


 


With respect to Adjusted Awards, the provisions
below will be applicable only to the extent that they are not inconsistent with
the Employee Matters Agreement and the terms of the Adjusted Award assumed
under the Employee Matters Agreement:


 


(a)           Nature of
Awards and Certificates.  Shares of Restricted Stock are actual Shares
issued to a Participant, and shall be evidenced in such manner as the Committee
may deem appropriate, including book-entry registration or issuance of one or
more stock certificates.  Any certificate
issued in respect of Shares of Restricted Stock shall be registered in the name
of the applicable Participant and, in the case of Restricted Stock, shall bear
an appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award, substantially in the following form:


 


“The transferability of this certificate and
the shares of stock represented hereby are subject to the terms and conditions
(including forfeiture) of the HSN, Inc. 2008 Stock and Annual Incentive
Plan and an Award Agreement.  Copies of
such Plan and Agreement are on file at the offices of HSN, Inc., 1 HSN
Drive, St. Petersburg, Florida 33729.”


 


The Committee may require that the
certificates evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed and that, as a condition of any Award of
Restricted Stock, the applicable Participant shall have delivered a stock
power, endorsed in blank, relating to the Common Stock covered by such Award.


 


(b)           Terms and
Conditions.  Shares of Restricted Stock shall be subject
to the following terms and conditions:


 


(i)            The Committee
shall, prior to or at the time of grant, condition the vesting or
transferability of an Award of Restricted Stock upon the continued service of
the applicable Participant
or the attainment of Performance Goals, or the attainment of Performance Goals
and the continued service of the applicable Participant.  In the event that the Committee conditions
the grant or vesting of an Award of Restricted Stock upon the attainment of
Performance Goals or the attainment of Performance Goals and the continued
service of the applicable Participant, the Committee may, prior to or at the
time of grant, designate such an Award as a Qualified Performance-Based
Award.  The conditions for grant,
vesting, or transferability and the other provisions of Restricted Stock Awards
(including without limitation any Performance Goals) need not be the same with
respect to each Participant.


 


(ii)           Subject to the
provisions of the Plan and the applicable Award Agreement, during the period,
if any, set by the Committee, commencing with the date of such Restricted Stock
Award for which such vesting restrictions apply and until the expiration 


 


 


 


13

















 


of
such vesting restrictions (the “Restriction Period”), the Participant shall not
be permitted to sell, assign, transfer, pledge or otherwise encumber Shares of
Restricted Stock.


 


(iii)          Except as provided
in this Section 6 and in the applicable Award Agreement, the applicable Participant
shall have, with respect to the Shares of Restricted Stock, all of the rights
of a stockholder of the Company holding the class or series of Common Stock
that is the subject of the Restricted Stock, including, if applicable, the
right to vote the Shares and the right to receive any cash dividends.  If so determined by the Committee in the applicable
Award Agreement and subject to Section 14(e), (A) cash dividends on
the class or series of Common Stock that is the subject of the Restricted Stock
Award shall be automatically deferred and reinvested in additional Restricted
Stock, held subject to the vesting of the underlying Restricted Stock, and (B) subject
to any adjustment pursuant to Section 3(d), dividends payable in Common
Stock shall be paid in the form of Restricted Stock of the same class as the
Common Stock with which such dividend was paid, held subject to the vesting of
the underlying Restricted Stock.


 


(iv)          Except as otherwise
set forth in the applicable Award Agreement, upon a Participant’s Termination
of Employment for any reason during the Restriction Period, all Shares of
Restricted Stock still subject to restriction shall be forfeited by such
Participant; provided, however, that subject to Section 11(b),
the Committee shall have the discretion to waive, in whole or in part, any or
all remaining restrictions with respect to any or all of such Participant’s
Shares of Restricted Stock.


 


(v)           If and when any
applicable Performance Goals are satisfied and the Restriction Period expires
without a prior forfeiture of the Shares of Restricted Stock for which legended
certificates have been issued, unlegended certificates for such Shares shall be
delivered to the Participant upon surrender of the legended certificates.


 


Section 7.  Restricted Stock Units


 


With respect to Adjusted Awards, the provisions
below will be applicable only to the extent that they are not inconsistent with
the  Employee Matters Agreement and the
terms of the Adjusted Award assumed under the Employee Matters Agreement:


 


(a)           Nature of
Awards.  Restricted Stock Units are Awards denominated
in Shares that will be settled, subject to the terms and conditions of the
Restricted Stock Units, in an amount in cash, Shares or both, based upon the
Fair Market Value of a specified number of Shares.


 


(b)           Terms and
Conditions.  Restricted Stock Units shall be subject to
the following terms and conditions:


 


(i)            The Committee
shall, prior to or at the time of grant, condition the grant, vesting, or
transferability of Restricted Stock Units upon the continued service of the
applicable Participant or the attainment of Performance Goals, or the attainment
of Performance Goals and the continued service of the applicable
Participant.  In the event that the
Committee conditions the grant or vesting of Restricted Stock Units upon the 


 


 


 


14

















 


attainment
of Performance Goals or the attainment of Performance Goals and the continued
service of the applicable Participant, the Committee may, prior to or at the
time of grant, designate such Awards as Qualified Performance-Based
Awards.  The conditions for grant, vesting
or transferability and the other provisions of Restricted Stock Units
(including without limitation any Performance Goals) need not be the same with
respect to each Participant.  An Award of
Restricted Stock Units shall be settled as and when the Restricted Stock Units
vest or at a later time specified by the Committee or in accordance with an
election of the Participant, if the Committee so permits.


 


(ii)           Subject to the
provisions of the Plan and the applicable Award Agreement, during the period,
if any, set by the Committee, commencing with the date of such Restricted Stock
Units for which such vesting restrictions apply and until the expiration of
such vesting restrictions (the “Restriction Period”), the Participant shall not
be permitted to sell, assign, transfer, pledge or otherwise encumber Restricted
Stock Units.


 


(iii)          The Award Agreement
for Restricted Stock Units shall specify whether, to what extent and on what
terms and conditions the applicable Participant shall be entitled to receive
current or deferred payments of cash, Common Stock or other property
corresponding to the dividends payable on the Common Stock (subject to Section 14(e) below).


 


(iv)          Except as otherwise
set forth in the applicable Award Agreement, upon a Participant’s Termination
of Employment for any reason during the Restriction Period, all Restricted
Stock Units still subject to restriction shall be forfeited by such
Participant; provided, however, that subject to Section 11(b),
the Committee shall have the discretion to waive, in whole or in part, any or
all remaining restrictions with respect to any or all of such Participant’s
Restricted Stock Units.


 


Section 8.  Other Stock-Based Awards


 


Other Awards of Common Stock and other Awards that
are valued in whole or in part by reference to, or are otherwise based upon or
settled in, Common Stock, including (without limitation), unrestricted stock,
performance units, dividend equivalents, and convertible debentures, may be
granted under the Plan.


 


Section 9.  Bonus Awards


 


(a)           Determination of Awards.  The Committee shall determine the total
amount of Bonus Awards for each Plan Year or such shorter performance period as
the Committee may establish in its sole discretion.  Prior to the beginning of the Plan Year or
such shorter performance period as the Committee may establish in its sole
discretion (or such later date as may be prescribed by the Internal Revenue
Service under Section 162(m) of the Code), the Committee shall
establish Performance Goals for Bonus Awards for the Plan Year or such shorter
period; provided, that such Performance Goals may be established at a
later date for Participants who are not “covered employees” (within the meaning
of Section 162(m)(3) of the Code). 
Bonus amounts payable to any individual Participant with respect to a
Plan Year will be limited to a maximum of $10 


 


 


15

















 


million.  For performance periods that are shorter than
a Plan Year, such $10 million maximum may be pro-rated if so determined by the
Committee.


 


(b)           Payment of Awards. 
Bonus Awards under the Plan shall be paid in cash or in shares of Common
Stock (valued at Fair Market Value as of the date of payment) as determined by
the Committee, as soon as practicable following the close of the Plan Year or
such shorter performance period as the Committee may establish.  It is intended that a Bonus Award will be
paid no later than the fifteenth (15th) day of the third month following the later of:  (i) the end of the Participant’s taxable
year in which the requirements for such Bonus Award have been satisfied by the
Participant or (ii) the end of the Company’s fiscal year in which the
requirements for such Bonus Award have been satisfied by the Participant.  The Committee may at its option establish
procedures pursuant to which Participants are permitted to defer the receipt of
Bonus Awards payable hereunder.  The
Bonus Award for any Plan Year or such shorter performance period to any
Participant may be reduced or eliminated by the Committee in its discretion.


 


Section 10.  Change in Control Provisions


 


(a)           Adjusted
Awards.  With respect to all Adjusted Awards, subject
to paragraph (e) of this Section 10, unless otherwise provided in the
applicable Award Agreement, notwithstanding any other provision of this Plan to
the contrary, upon a Participant’s Termination of Employment, during the
two-year period following a Change in Control, by the Company other than
for Cause or Disability or by the Participant for Good Reason (as defined below):


 


(i)            any Options
outstanding as of such Termination of Employment which were outstanding as of
the date of such Change in Control shall be fully exercisable and vested and
shall remain exercisable until the later of (i) the last date on which
such Option would be exercisable in the absence of this Section 10(a) and
(ii) the earlier of (A) the first anniversary of such Change in
Control and (B) expiration of the Term of such Option;


 


(ii)           the restrictions
and deferral limitations applicable to any Restricted Stock shall lapse, and
such Restricted Stock outstanding as of such Termination of Employment which
were outstanding as of the date of such Change in Control shall become free of
all restrictions and become fully vested and transferable; and


 


(iii)          all Restricted Stock
Units outstanding as of such Termination of Employment which were outstanding
as of the date of such Change in Control shall be considered to be earned and
payable in full, and any restrictions shall lapse and such Restricted Stock
Units shall be settled
as promptly as is practicable in (subject to Section 3(d)) the form set
forth in the applicable Award Agreement.


 


(b)           Impact
of Event on Awards other than Adjusted Awards.  Subject to paragraph (e) of this Section 10, and
paragraph (d) of Section 12, unless otherwise provided in any
applicable Award Agreement and except as otherwise provided in paragraph (a) of
this 


 


 


 


16

















 


Section 10,
in connection with a Change of Control, the Committee may make such adjustments
and/or settlements of outstanding Awards as it deems appropriate and consistent
with the Plan’s purposes, including, without limitation, the acceleration of
vesting of Awards either upon a Change of Control or upon various terminations
of employment following a Change of Control. 
The Committee may provide for such adjustments as a term of the Award or
may make such adjustments following the granting of the Award.


 


(c)           Definition
of Change in Control.  For purposes of the Plan, unless otherwise
provided in an option agreement or other agreement relating to an Award, a “Change
in Control” shall mean the happening of any of the following events:


 


(i)            The acquisition by
any individual, entity or Group (a “Person”), other than the Company, of
Beneficial Ownership of equity securities of the Company representing more than
50% of the voting power of the then outstanding equity securities of the
Company entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided,
however, that any
acquisition that would constitute a Change in Control under this subsection (i) that
is also a Business Combination shall be determined exclusively under subsection
(iii) below; or


 


(ii)           Individuals who, as
of the Effective Date, constitute the Board (the “Incumbent Directors”)
cease for any reason to constitute at least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the Effective Date, whose election, or
nomination for election by the Company’s stockholders, was approved by a vote
of at least a majority of the Incumbent Directors at such time shall become an
Incumbent Director, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or


 


(iii)          Consummation of a
reorganization, merger, consolidation, sale or other disposition of all or
substantially all of the assets of the Company, the purchase of assets or stock
of another entity, or other similar corporate transaction (a “Business
Combination”), in each case, unless immediately following such Business Combination,
(A) more than 50% of the Resulting Voting Power shall reside in
Outstanding Company Voting Securities retained by the Company’s stockholders in
the Business Combination and/or voting securities received by such stockholders
in the Business Combination on account of Outstanding Company Voting
Securities, and (B) at least a majority of the members of the board of
directors (or equivalent governing body, if applicable) of the entity resulting
from such Business Combination were Incumbent Directors at the time of the
initial agreement, or action of the Board, providing for such Business
Combination; or


 


(iv)          Approval by the
stockholders of the Company of a complete liquidation or dissolution of the
Company.


 


Notwithstanding
the foregoing, the Separation shall not constitute a Change in Control.  For the avoidance of doubt, with respect to
Adjusted Awards, any reference in an Award Agreement or 


 


 


 


17

















 


the
applicable IAC Long Term Incentive Plan to a “change in control,” “change of
control” or similar definition shall be deemed to refer to a Change of Control
hereunder.


 


(d)           For
purposes of this Section 10, “Good Reason” means (i) “Good Reason” as
defined in any Individual Agreement or Award Agreement to which the applicable
Participant is a party, or (ii) if there is no such Individual Agreement
or if it does not define Good Reason, without the Participant’s prior written
consent: (A) a material reduction in the Participant’s rate of annual base
salary from the rate of annual base salary in effect for such Participant
immediately prior to the Change in Control, (B) a relocation of the
Participant’s principal place of business more than 35 miles from the city in
which such Participant’s principal place of business was located immediately
prior to the Change in Control or (C) a material and demonstrable adverse
change in the nature and scope of the Participant’s duties from those in effect
immediately prior to the Change in Control. 
In order to invoke a Termination of Employment for Good Reason, a
Participant shall provide written notice to the Company of the existence of one
or more of the conditions described in clauses (A) through (C) within
90 days following the Participant’s knowledge of the initial existence of such
condition or conditions, and the Company shall have 30 days following receipt
of such written notice (the “Cure Period”) during which it may remedy the
condition.  In the event that the Company
fails to remedy the condition constituting Good Reason during the Cure Period,
the Participant must terminate employment, if at all, within 90 days following
the Cure Period in order for such Termination of Employment to constitute a
Termination of Employment for Good Reason.


 


(e)           Notwithstanding
the foregoing, if any Award is subject to Section 409A of the Code, this Section 10
shall be applicable only to the extent specifically provided in the Award Agreement
and as permitted pursuant to Section 14(k).


 


Section 11.  Qualified Performance-Based Awards; Section 16(b)


 


(a)           The
provisions of this Plan are intended to ensure that all Options and Stock Appreciation
Rights granted hereunder to any Participant who is or may be a “covered
employee” (within the meaning of Section 162(m)(3) of the Code) in
the tax year in which such Option or Stock Appreciation Right is expected to be
deductible to the Company qualify for the Section 162(m) Exemption,
and all such Awards shall therefore be considered Qualified Performance-Based
Awards and this Plan shall be interpreted and operated consistent with that
intention (including, without limitation, to require that all such Awards be
granted by a committee composed solely of members who satisfy the requirements
for being “outside directors” for purposes of the Section 162(m) Exemption
(“Outside Directors”)).  When
granting any Award other than an Option or Stock Appreciation Right, the
Committee may designate such Award as a Qualified Performance-Based Award,
based upon a determination that (i) the recipient is or may be a “covered
employee” (within the meaning of Section 162(m)(3) of the Code) with
respect to such Award, and (ii) the Committee wishes such Award to qualify
for the Section 162(m) Exemption, and the terms of any such Award
(and of the grant thereof) shall be consistent with
such designation (including, without limitation, that all such Awards be
granted by a committee composed solely of Outside Directors).


 


(b)           Each
Qualified Performance-Based Award (other than an Option or Stock Appreciation
Right) shall be earned, vested and payable (as applicable) only upon the 


 


 


 


18

















 


achievement
of one or more Performance Goals (as certified in writing by the Committee,
except if compensation is attributable solely to the increase in the value of
the Common Stock), together with the satisfaction of any other conditions, such
as continued employment, as the Committee may determine to be appropriate, and
no Qualified Performance-Based Award may be amended, nor may the Committee
exercise any discretionary authority it may otherwise have under this Plan with
respect to a Qualified Performance-Based Award under this Plan, in any manner
that would cause the Qualified Performance-Based Award to cease to qualify for
the Section 162(m) Exemption; provided, however, that (i) the
Committee may provide, either in connection with the grant of the applicable
Award or by amendment thereafter, that achievement of such Performance Goals
will be waived upon the death or Disability of the Participant or under any
other circumstance with respect to which the existence of such possible waiver
will not cause the Award to fail to qualify for the Section 162(m) Exemption
as of the Grant Date, and (ii) the provisions of Section 10 shall
apply notwithstanding this Section 11(b).


 


(c)           The
full Board shall not be permitted to exercise authority granted to the
Committee to the extent that the grant or exercise of such authority would
cause an Award designated as a Qualified Performance-Based Award not to qualify
for, or to cease to qualify for, the Section 162(m) Exemption.


 


(d)           The
provisions of this Plan are intended to ensure that no transaction under the
Plan is subject to (and not exempt from) the short-swing recovery rules of
Section 16(b) of the Exchange Act (“Section 16(b)”).  Accordingly, the composition of the Committee
shall be subject to such limitations as the Board deems appropriate to permit
transactions pursuant to this Plan to be exempt (pursuant to Rule 16b-3
promulgated under the Exchange Act) from Section 16(b), and no delegation
of authority by the Committee shall be permitted if such delegation would cause
any such transaction to be subject to (and not exempt from) Section 16(b).


 


Section 12.  Term, Amendment and Termination


 


(a)           Effectiveness.  The Plan shall be
effective as of the date (the “Effective Date”) it is adopted by the
Board, subject to the approval by the holders of at least a majority of the
voting power represented by outstanding capital stock of the Company that is
entitled generally to vote in the election of directors.


 


(b)           Termination.  The Plan will
terminate on the tenth anniversary of the Effective Date.  Awards outstanding as of such date shall not
be affected or impaired by the termination of the Plan.


 


(c)           Amendment
of Plan.  The Board may amend, alter, or discontinue
the Plan, but no amendment, alteration or discontinuation shall be made which
would materially impair the rights of the Participant with respect to a
previously granted Award without such Participant’s consent, except such an
amendment made to comply with applicable law, including without limitation Section 409A
of the Code, stock exchange rules or accounting rules.  In addition, no such amendment shall be made
without the approval of the Company’s stockholders to the extent such approval
is required by applicable law or the listing standards of the Applicable
Exchange.


 


 


 


19

















 


(d)           Amendment
of Awards.  Subject to Section 5(d), the Committee
may unilaterally amend the terms of any Award theretofore granted, but no such
amendment shall cause a Qualified Performance-Based Award to cease to qualify
for the Section 162(m) Exemption or without the Participant’s consent
materially impair the rights of any Participant with respect to an Award,
except such an amendment made to cause the Plan or Award to comply with
applicable law, stock exchange rules or accounting rules.


 


Section 13.  Unfunded Status of Plan


 


It is presently intended that the Plan constitute an
“unfunded” plan for incentive and deferred compensation.  The Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Common Stock or make payments; provided,
however, that unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the “unfunded” status of the Plan.


 


Section 14.  General Provisions


 


(a)           Conditions
for Issuance.  The Committee may
require each person purchasing or receiving Shares pursuant to an Award to
represent to and agree with the Company in writing that such person is
acquiring the Shares without a view to the distribution thereof.  The certificates for such Shares may include
any legend which the Committee deems appropriate to reflect any restrictions on
transfer.  Notwithstanding any other
provision of the Plan or agreements made pursuant thereto, the Company shall
not be required to issue or deliver any certificate or certificates for Shares under
the Plan prior to fulfillment of all of the following conditions:  (i) listing or approval for listing upon
notice of issuance, of such Shares on the Applicable Exchange; (ii) any
registration or other qualification of such Shares of the Company under any
state or federal law or regulation, or the maintaining in effect of any such
registration or other qualification which the Committee shall, in its absolute
discretion upon the advice of counsel, deem necessary or advisable; and (iii) obtaining
any other consent, approval, or permit from any state or federal governmental
agency which the Committee shall, in its absolute discretion after receiving
the advice of counsel, determine to be necessary or advisable.


 


(b)           Additional
Compensation Arrangements.  Nothing contained in the Plan shall prevent
the Company or any Subsidiary or Affiliate from adopting other or additional
compensation arrangements for its employees.


 


(c)           No
Contract of Employment.  The Plan shall not constitute a contract of
employment, and adoption of the Plan shall not confer upon any employee any
right to continued employment, nor shall it interfere in any way with the right
of the Company or any Subsidiary or Affiliate to terminate the employment of
any employee at any time.


 


(d)           Required
Taxes.  No later than the date as of which an amount
first becomes includible in the gross income of a Participant for federal,
state, local or foreign income or employment or other tax purposes with respect
to any Award under the Plan, such Participant shall pay to
the Company, or make arrangements satisfactory to the Company regarding the
payment of, any federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. 
If determined by the Company, withholding obligations may be 


 


 


 


20

















 


settled with Common Stock, including
Common Stock that is part of the Award that gives rise to the withholding
requirement.  The obligations of the
Company under the Plan shall be conditional on such payment or arrangements,
and the Company and its Affiliates shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment otherwise due to such Participant.  The Committee may establish such procedures
as it deems appropriate, including making irrevocable elections, for the
settlement of withholding obligations with Common Stock.


 


(e)           Limitation
on Dividend Reinvestment and Dividend Equivalents.  Reinvestment of
dividends in additional Restricted Stock at the time of any dividend payment,
and the payment of Shares with respect to dividends to Participants holding
Awards of Restricted Stock Units, shall only be permissible if sufficient
Shares are available under Section 3 for such reinvestment or payment
(taking into account then outstanding Awards). 
In the event that sufficient Shares are not available for such
reinvestment or payment, such reinvestment or payment shall be made in the form
of a grant of Restricted Stock Units equal in number to the Shares that would
have been obtained by such payment or reinvestment, the terms of which
Restricted Stock Units shall provide for settlement in cash and for dividend
equivalent reinvestment in further Restricted Stock Units on the terms
contemplated by this Section 14(e).


 


(f)            Designation
of Death Beneficiary.  The Committee shall establish such procedures
as it deems appropriate for a Participant to designate a beneficiary to whom
any amounts payable in the event of such Participant’s death are to be paid or
by whom any rights of such eligible Individual, after such Participant’s death,
may be exercised.


 


(g)           Subsidiary
Employees.  In the case of a grant of an Award to any
employee of a Subsidiary of the Company, the Company may, if the Committee so
directs, issue or transfer the Shares, if any, covered by the Award to the
Subsidiary, for such lawful consideration as the Committee may specify, upon
the condition or understanding that the Subsidiary will transfer the Shares to
the employee in accordance with the terms of the Award specified by the
Committee pursuant to the provisions of the Plan.  All Shares underlying Awards that are
forfeited or canceled should revert to the Company.


 


(h)           Governing
Law and Interpretation.  The Plan and all Awards made and actions
taken thereunder shall be governed by and construed in accordance with the laws
of the State of Delaware, without reference to principles of conflict of
laws.  The captions of this Plan are not
part of the provisions hereof and shall have no force or effect.


 


(i)            Non-Transferability.  Except as otherwise
provided in Section 5(j) or by the Committee, Awards under the Plan
are not transferable except by will or by laws of descent and distribution.


 


(j)            Foreign
Employees and Foreign Law Considerations.  The Committee may grant Awards to Eligible
Individuals who are foreign nationals, who are located outside the United
States or who are not compensated from a payroll maintained in the United
States, or who are otherwise subject to (or could cause
the Company to be subject to) legal or regulatory provisions of countries or
jurisdictions outside the United States, on such terms and conditions different
from those specified in the Plan as may, in the judgment of the Committee, be 


 


 


 


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necessary or desirable to foster and
promote achievement of the purposes of the Plan, and, in furtherance of such
purposes, the Committee may make such modifications, amendments, procedures, or
subplans as may be necessary or advisable to comply with such legal or
regulatory provisions.


 


(k)           Section 409A
of the Code.  It is the intention of the Company that no
Award shall be “deferred compensation” subject to Section 409A of the
Code, unless and to the extent that the Committee specifically determines
otherwise as provided in the immediately following sentence, and the Plan and
the terms and conditions of all Awards shall be interpreted accordingly.  The terms and conditions governing any Awards
that the Committee determines will be subject to Section 409A of the Code,
including any rules for elective or mandatory deferral of the delivery of
cash or Shares pursuant thereto and any rules regarding treatment of such
Awards in the event of a Change in Control, shall be set forth in the applicable
Award Agreement, and shall comply in all respects with Section 409A of the
Code.  Notwithstanding any other
provision of the Plan to the contrary, with respect to any Award that
constitutes a “nonqualified deferred compensation plan” subject to Section 409A
of the Code, any payments (whether in cash, Shares or other property) to be
made with respect to the Award upon the Participant’s Termination of Employment
shall be delayed until the first day of the seventh month following the
Participant’s Termination of Employment if the Participant is a “specified
employee” within the meaning of Section 409A of the Code.


 


(l)            Employee Matters Agreement.  Notwithstanding anything in this Plan to the
contrary, to the extent that the terms of this Plan are inconsistent with the
terms of an Adjusted Award, the
terms of the Adjusted Award shall be governed by the Employee Matters
Agreement, the applicable IAC Long-Term Incentive Plan and the award agreement
entered into thereunder.


 


 


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